Whether order u/s 148A(d) can travel beyond the grounds noted in Notice u/s 148A(b) of the Income-tax Act,1961 ?

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Whether order u/s 148A(d) can travel beyond the grounds noted in Notice u/s 148A(b) of the Income-tax Act,1961 ?

 

Here is an interesting issue before Karnataka High Court in the case of Smt Vasant Ramdas Pai Vs ITO.

The issue was whether order u/s 148A(d) can travel beyond the grounds noted in Notice u/s 148A(b) of the Income-tax Act,1961 ?

The Hon’ble Karnataka High court in this case was considering validity of reassessment proceedings in relation to certain transactions of sale of shares which shares were received upon demerger of an undertaking which happened in pursuance of the approval of the National Company Law Tribunal(NCLT) after NOC from the department. The court after exchange of arguments noted as follows:-

1.   The provisions of Section 148A employs the word “Shall” which means that AO has to objectively consider not only the material gathered but the reply given by the assessee as well.

2.   Whether there is information suggesting escapement of income is a jurisdictional fact which can be subject matter of challenge.

3.   CBDT has issued instruction on 10.12.2021 as to what is information and how it will be collected.

4.   What is the meaning of “suggest” and “information” in the context of reassessment.

5.   Under the new law, the phrase information to suggest escapement of income means grater responsibility on the AO as against “reason to believe” under the earlier law to prove that there is income escaping assessment.

6.   The order u/s 148A(d) has to be passed considering the objections if any raised in response to notice u/s 148A(b). Reliance was placed on Calcutta high court decision in the case of Somnath Dealtrade Pvt ltd Vs Union of India(2023) 455 ITR 720(Cal).

On the aforesaid basis the notice u/s 148 and all proceedings were quashed. This judgment is one where comparison between old and new law and the implications of changes which have been made under the new law has been considered threadbare and will be helpful in any reassessment proceeding.

 

The copy of the order is as under:

 

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